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asambeis [7]
3 years ago
8

A 10-year annual payment corporate bond has a market price of $1,050. It pays annual interest of $100 and its required rate of r

eturn is 9 percent. By how much is the bond mispriced?\
Business
1 answer:
bija089 [108]3 years ago
6 0

Answer:

bond under priced is  $14.18

Explanation:

given data

market price = $1,050

annual interest = $100

rate of return = 9 percent

time period = 10 year

solution

we get here bond mis priced so for we get first theoretical Price of the bond that is

theoretical Price of the bond  = annual interest × \frac{1- (1+r)^{-t }}{r} +  \frac{1000}{(1+r)^t}  ........1

theoretical Price of the bond  = 100 × \frac{1- (1+0.09)^t }{-10} + \frac{1000}{(1+0.09)^{10}}    

theoretical Price of the bond  = $1064.18

but actual Price is $1050

so here bond is under priced as  $1064.18 - $1050

bond under priced is  $14.18

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The total value (debt plus equity) of Wilson Dover Inc. is $500 million and the face value of its 1-year coupon debt is $200 mil
Nadya [2.5K]

Answer:

The yield on Wilson Dover's debt is 7.42%

Explanation:

In order to calculate the yield on Wilson Dover's debt we would have to calculate first the value of debt as follows:

value of debt=Total value*N(d1)-Debt*e∧-r fx period*N(d2)

value of debt=$500 million*0.9720-$200 million*2.7183∧-0.05*1*0.9050

value of debt=$486 million-$200 million*0.951229*0.9050

value of debt=$486 million-$172.1724 million

value of debt=$313.8276 million

=Total Value-Value of debt

=$186.17 million

The value of debt is $186.17 million

So, to calculate the yield we have to use the following formula:

Yield=(Face Value/current value)∧1/period-1

Yield=($200 million/$186.17 million)∧1-1

Yield=1.074286942-1

Yield=7.42%

The yield on Wilson Dover's debt is 7.42%

8 0
3 years ago
While preparing its bank reconciliation, how should nordstrom record funds approved by visa but not yet received since the trans
Gnom [1K]
<span>The records might not have been found because the transfer took more than or equal to two days.It could be approved by visa after the transfer will be done successfully.</span>
7 0
4 years ago
Why do infomercials use both strong and weak arguments? to appeal to both high and low involvement consumers because it is neces
Vesna [10]

Answer:

The correct answer is letter "A": to appeal to both high and low involvement consumers.

Explanation:

Strong arguments are those that provide probable support for an idea. Weak arguments fail to provide support for different matters. Then, when talking about marketing, strong arguments are more likely to engage consumers with a product while weak arguments can attract consumers at low levels but the ideas lack reliability.

Thus,<em> infomercials can make use of both strong and weak arguments at different levels of consumer involvement.</em>

4 0
3 years ago
Fama and French have suggested that many market anomalies can be explained as manifestations of ____________.A. regulatory effec
stiks02 [169]

Answer:

D. varying risk premiums

Explanation:

Fama and French has a total of three factors considered in the study:

Size of firms, book to market values, and the additional return on the market.

For all these market anomalies the study is based on the varying risk premiums assigned.

As for the market efficiency the out performance is explained by the risk and value that is of small stocks due to high cost of capital associated, and with that there is great business risk also associated.

7 0
3 years ago
You are a manager for a monopolistically competitive firm. From experience, the profit-maximizing level of output of your firm i
Paraphin [41]

Answer:

hi your question lacks the required options here is the complete question and options

You are a manager for a monopolistically competitive firm. From experience, the profit-maximizing level of output of your firm is 100 units. However, it is expected that prices of other close substitutes will fall in the near future. How should you adjust your level of production in response to this change

a. Produce less than 100 units

b. Insufficient information to decide

c. Produce 100 units

d. Produce more than 100 units

Answer : Produce less than 100 units

Explanation:

A monopolistic firm is a firm that has the sole responsibility or sole ownership of the right of production of certain goods and services. and such products are profit maximizing products because the demand for the products determines the price in the market and also the products are produced at marginal cost equaling its marginal revenue.

From experience when the prices of the close substitutes of the product fall the demand for the product will decrease hence its market price will fall therefore it is wise to produce less than the usual 100 units to still maximize profit.

5 0
3 years ago
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